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-(Figure: Classical versus Keynesian Macroeconomics) Refer to Figure: Classical versus Keynesian Macroeconomics.According to the classical view,if this economy shifts from AD₁ to AD₂,perhaps because of a large decline in investment spending by businesses,the price level will _____ and real GDP will _____.

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-(Figure: Classical versus Keynesian Macroeconomics) Refer to Figure: Classical versus Keynesian Macroeconomics.According to the classical view,if this economy shifts from AD₁ to AD₂,perhaps because of a large decline in investment spending by businesses,the price level will _____ and real GDP will _____.

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According to the classical view, prices are flexible, and the economy is self-correcting. Therefore, a shift from AD1 to AD2 would lead to a decrease in the price level, but real GDP would remain unchanged as the economy would adjust back to full employment output.

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